Equity indexes kick off 2011 with a bang

The market continued to rise throughout the morning following the data, but the pace slowed. By noon the indexes were having trouble hitting and holding new highs and began to round off. The uptrend channel broke in the early afternoon with the Nasdaq leading the correction shortly after noon. It triggered a Momentum ReversalTM on the five-minute time frame that led to selling into the closing bell.

The S&P 500 and Dow Jones Ind. Ave. also remained weak throughout the second half of the day. Their most notable sell signals came at 14:00 ET when the break of the morning's uptrend channel was followed by a base between 13:00-14:00 ET. This is a little difficult to discern on the charts here due to the distortion of the gap, but the set-up was a nearly textbook version of a short pattern I call the AvalancheTM. It triggered coming out of the 14:00 ET correction period and the 5 minute 20 sma remained resistance for all three of the major indices throughout the afternoon.

About the Author

Toni Hansen is president and co-founder of the Bastiat Group, Inc., DBA Trading From Main Street. Toni is one of the most respected technical analysts and traders in the industry. She has been trading and educating new traders, money managers, professional market analysts and traders throughout the boom and bust of the last decade. She has worked in conjunction with some of the world's top financial exchanges. Learn more about Toni Hansen and the educational services she provides through her website at http://www.tonihansen.com.